Corn or Soybean in 2016?

2016 Corn Soybeans

by David A. Widmar

As fall harvest begins attention will start to focus on 2016. Early glimpses of what next spring might have in store are beginning to emerge. While a lot can (and likely will) change before planters head to the fields, 2016 is shaping up to be less favorable to soybean production. To examine further, we looked at the latest Purdue University crop budget estimates.

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Does the Natural Hedge Work?

by Brent Gloy and David Widmar

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In last week’s post we used USDA yield estimates to look at how revenue expectations have changed as commodity prices deteriorated. This led us to wonder about the ‘natural hedge’ and its effectiveness; how strong the natural hedge is and how much variability is there across the country.

Economists often talk of a natural hedge occurring when low yields are offset by higher commodity prices, and high yields are offset by lower commodity prices. In theory, this condition naturally adjusts revenue as yields and prices move in opposite directions, serving as an automatic risk management tool. In this week’s post, we examine historical county-level yield and state-level market year average (MYA) prices to better understand the natural hedge.

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The Dollar: Add it to Your Watch List

by David A. Widmar

Since 2011 the U.S. dollar has begun to strengthen.  Because exports are a critical component of grain demand, we decided that it would be important to look at how strength in the dollar impacts the prices that foreign buyers of U.S. grain face.

The most recent USDA WASDE projection is for exports to account for 12.9% of corn usage, 48.3% of soybean usage, and 43.8% of wheat usage. There are many different factors that influence exports. In addition to the shipping fees, port charges, fuel surcharges, tariffs, quota, and embargoes, exchange rates can play a critical role and they are sometimes hard to put in perspective.

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